> Equities and the ruble took a hit. Russian equities fell hard yesterday as a reaction to media reports of widespread public protests against Sunday's parliamentary election. Reports referred to multiple protests and arrests alongside a heightened security presence in Moscow and other major cities - the clear impression being that Russia is in danger of experiencing its own Arab Spring event and that the election outcome may mark the start of a winter of discontent in Russia marked by social instability and political uncertainty. That fear was the major reason for the 4.7% fall in the RTS Index, the 4.0% loss on MICEX and the 6.4% decline in the IOB GDR index. Those losses compared with a fall of 1.3% for the MSCI EM Index. The ruble was another casualty, falling 24 bps against the dollar and 11 basis points against the euro by the close of MICEX trade yesterday.

> ADRs fell against a rising S&P 500. While the S&P 500 Index ended with a gain of 0.1%, Russia's ADRs lost heavily, with VimpelCom Ltd and MTS off between 5.5% and 6.0% and Mechel down 11.0% - again, the major reason being the headlines from Moscow.

> News taken out of context. The first point to note is that protests in Moscow are not as uncommon as was the case several years ago. Several groups regularly attract the relatively small number of protestors that were seen yesterday. The Strategy 31 Group holds a regular protest meeting on the last day of every 31-day month in central Moscow, and the mayor's office has made it easier for groups to protest than was the case under the previous Moscow regime. Secondly, it is also not an unusual sight to see OMON police stationed in central Moscow. It is a familiar sight on weekends around the popular tourist locations and at central city metro stations. During football match days, for example, the presence is usually ratcheted up. Current events, therefore, should not be taken out of that context and are certainly not a reason to justify a market sell-off.

> More important short-term market worries. At this point in time, the much more important issues for investors in the Russian market include the following. 
- S&P's warning about possible downgrades across the Eurozone countries. 
- The still-serious threat to the global economy should the EU leaders fail to contain the debt threat. 
- China's economic growth and demand for imported commodities. 
- Where the price of oil trades.

> China data on Friday. Friday will be the next important day giving an update on several of those issues, as that is when the EU leaders will meet to try to agree a framework to contain the debt and deficit problems. It is also when China reports its November macro data. Investors in China clearly fear negative surprises, as evidenced by the relatively weaker equity market last week (i.e. when global markets were rising) after the Central Bank announced the reserve requirement cut. It is a case of "what do they know that we don't yet know" for investors.

Chris Weafer, Chief Strategist Troika Dialogue